Retirement planning, in a financial context, refers to the allocation of savings or revenue for

retirement Retirement is the withdrawal from one's position or occupation or from one's active working life. A person may also semi-retire by reducing work hours or workload. Many people choose to retire when they are elderly or incapable of doing their j ...

. The goal of retirement planning is to achieve

financial independence Financial independence is the status of having enough income or wealth sufficient to pay one's living expenses for the rest of one's life without having to be employed or dependent on others.Cummuta, John. The Myths & Realities of Achieving Fina ...

. The process of retirement planning aims to: *Assess readiness-to-retire given a desired retirement age and lifestyle, i.e., whether one has enough money to retire *Identify actions to improve readiness-to-retire *Acquire financial planning knowledge *Encourage saving practices

Obtaining a financial plan

Producers such as a

financial planner A financial planner or personal financial planner is a qualified financial advisor. Practicing in full service personal finance, they advise clients on investments, insurance, tax, retirement and estate planning. As a general rule, a financial ...

financial adviser A financial adviser or financial advisor is a professional who provides financial services to clients based on their financial situation. In many countries, financial advisors must complete specific training and be registered with a regulatory ...

can help clients develop retirement plans, where compensation is either fee-based or commissioned contingent on product sale; see

Professional certification in financial services Following is a partial list of professional certifications in financial services, with an overview of the educational and continuing requirements for each; see and :Professional certification in finance for all articles. As the field of finan ...

. Such an arrangement is sometimes viewed as in conflict with a consumer's interest, and that the advice rendered cannot be without bias, or at a cost that justifies its value. Consumers can now elect a

do it yourself "Do it yourself" ("DIY") is the method of building, modifying, or repairing things by oneself without the direct aid of professionals or certified experts. Academic research has described DIY as behaviors where "individuals use raw and semi ...

(DIY) approach. For example, retirement web-tools in the form of a calculator,

mathematical model A mathematical model is a description of a system using mathematical concepts and language. The process of developing a mathematical model is termed mathematical modeling. Mathematical models are used in the natural sciences (such as physics, ...

decision support system A decision support system (DSS) is an information system that supports business or organizational decision-making activities. DSSs serve the management, operations and planning levels of an organization (usually mid and higher management) and h ...

are available online. A web-based tool that allows client to fully plan, without human intervention, might be considered a producer. Key motivations of the DIY trend are many of the same arguments for

lean manufacturing Lean manufacturing is a production method aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It is closely related to another concept called just-in-time manufacturing ( ...

, a constructive alteration of the relationship between producer and consumer.

Personal planning

* Preparing working environment. * Prepare mentally and plan to involve in hobbies and develop new interests to be engaged with retirement life. * Plan and prepare for the transition impact of retirement with home life. * Plan how active you want to be when you reach retirement age, engage in part-time, contract work or in activities that doesn't overextend oneself. * Stay connected with the community. * Learning to appreciate leisure, moderating work-life balance and to say no without regrets.

Modeling and limitations

Retirement finances touch upon distinct subject areas or

financial domains Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of Production (economics), production, Distribution (economics), distribution, and Consumption (economics) ...

of client importance, including: investments (i.e., stocks, bonds,

mutual fund A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...

s);

real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more general ...

; debt; taxes;

cash flow A cash flow is a real or virtual movement of money: *a cash flow in its narrow sense is a payment (in a currency), especially from one central bank account to another; the term 'cash flow' is mostly used to describe payments that are expected ...

(income and expense) analysis; insurance; defined benefits (e.g.,

social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

, traditional pensions). From an analytic perspective, each domain can be formally characterized and modeled using a different

class Class or The Class may refer to: Common uses not otherwise categorized * Class (biology), a taxonomic rank * Class (knowledge representation), a collection of individuals or objects * Class (philosophy), an analytical concept used differentl ...

representation, as defined by a domain's unique set of attributes and behaviors. Domain models require definition only at a level of abstraction necessary for decision analysis. Since planning is about the future, domains need to extend beyond current state description and address uncertainty, volatility, change dynamics (i.e., constancy or

determinism Determinism is a philosophical view, where all events are determined completely by previously existing causes. Deterministic theories throughout the history of philosophy have developed from diverse and sometimes overlapping motives and consi ...

is not assumed). Together, these factors raise significant challenges to any current producer claim of model predictability or certainty. Volatility in investment markets raises questions for everyone, participants, and fiduciaries alike. With the growth of 401(k) and other individual account retirement plans, many participants are responsible for investing their retirement savings.

Monte Carlo method

The

Monte Carlo method Monte Carlo methods, or Monte Carlo experiments, are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results. The underlying concept is to use randomness to solve problems that might be determi ...

is the most common form of a

that is applied to predict long-term investment behavior for a client's retirement planning. Its use helps to identify adequacy of client's investment to attain retirement readiness and to clarify strategic choices and actions. Yet, the investment domain is only a financial domain and therefore is incomplete. Depending on client context, the investment domain may have very little importance in relation to a client's other domains—e.g., a client who is predisposed to the use of real estate as a primary source of retirement funding.

Other models

Contemporary retirement planning models have yet to be validated in the sense that the models purport to project a future that has yet to manifest itself. The criticism with contemporary models are some of the same levied against

Neoclassical economics Neoclassical economics is an approach to economics in which the production, consumption and valuation (pricing) of goods and services are observed as driven by the supply and demand model. According to this line of thought, the value of a good ...

. The critic argues that contemporary models may only have proven validity retrospectively, whereas it is the indeterminate future that needs solution. A more moderate school believes that retirement planning methods must further evolve by adopting a more robust and integrated set of tools from the field of

complexity science A complex system is a system composed of many components which may interact with each other. Examples of complex systems are Earth's global climate, organisms, the human brain, infrastructure such as power grid, transportation or communication s ...

. Recent research has explored the effects of the elimination of capital income taxes on saving-for-retirement opportunities and its impact on government debt.

Federal Reserve Bank of Minneapolis Federal or foederal (archaic) may refer to: Politics General *Federal monarchy, a federation of monarchies *Federation, or ''Federal state'' (federal system), a type of government characterized by both a central (federal) government and states or ...

"On Efficiently Financing Retirement"
November 2011.

References

External links

* http://www.investopedia.com/university/retirement/ * https://www.forbes.com/retirement/ {{Authority control Retirement